Canalys: Channel success metrics have changed

The metrics of what defines channel success have changed, with partners relying on being rewarded for transacting deals finding life will become more difficult

Vendor incentive schemes, most notably Microsoft’s offering, have moved away from focusing on transactions to reward a customer lifecycle approach – and that trend shows no sign of slowing.

Alistair Edwards, chief analyst at Omdia, indicated that although some firms had exited the market, the channel had remained largely stable in the past year. However, in the face of artificial intelligence (AI) and the demand for increased consultancy, firms risk losing business if the focus remains on transacting traditional deals.

“We are seeing a decline in the number of partners and there is a reduction in the number of hardware partners,” he said. “But the decline – even in an uncertain, volatile market – has not been significant. We are seeing new partners coming into the market. We’re also seeing consultants, AI specialists, who signed to play roles of channel partners. So, it stayed relatively stable.”

He added that the total addressable market across EMEA was around $1.4tn this year, growing at 6%, and 75% of that would be delivered through partners. But an increasing amount of those opportunities will be heading to firms that can provide more support to customers.

“Success is no longer determined by your ability just to transact efficiently and effectively and to deliver close to the lot services,” Edwards told the audience at Canalys Channel Forums.

“It’s now being defined by a new set of deep, complex deals and innate understanding of how new technologies like AI, and the data that it relies on, transform your customers businesses, and the ability to apply that understanding to real business value.”

Edwards encouraged the channel to look beyond the business they relied on now and to plan for the next three to five years, despite the growth current transactions were generating.

“In fact, 67% of EMEA partners expect their business to grow this year compared to last year,” he said. “The majority, over 50% of you, tell us you’re going to grow in double digits. We have seen growth coming from cyber security, commercial PC refresh, datacentre upgrade and modernisation, AI infrastructure, software, network upgrade and hybrid cloud.

“All these things are contributing to your growth. It’s a positive picture, and it reinforces the importance of the channel. But there is a risk here, because we are seeing a longer-term fundamental change in the IT industry. And one of the challenges is that as we focus on this short-term opportunity, this refresh cycle that’s going to sustain business for at least next year or so, we’re not thinking about the future.

“We need to think about [the future] as we prepare for what’s to come, and there are going to be more and more partners that fall behind and fail to take those steps that help them to prepare for the future,” he said.

The elements that would support future success included being collaborative and striking the right relationships across the ecosystem.

“Your business value must increasingly be determined by you and your customers, and not the vendors you sell,” said Edwards. “In an AI-led world, this will be increasingly true. The relationships that define your success in the past are not the ones that are going to define your success in future.”

He concluded by outlining three areas where partners could improve their ability to thrive in the future.

“The first is building the vision for the future – think about the next three to five years, think about the changes you need to make within your business to reposition your value and be in front of where the market is going to be,” Edwards said.

“Then, specialisation will be critical to your ability to meet the changing demands of customers from a technology point of view. [Finally,] collaboration – no one is in a position to do this themselves, and working in a combined ecosystem, being much more integrated, and working with distributors will be key to that delivery of a platform ecosystem,” he concluded.